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Category: Assets not Liabilities

I gave a guest lecture at Birkbeck College, of the University of London on the evening of 22nd February 2017 in the evening, as part of the Energy and Climate Change module. I titled it, “Renewable Gas for Energy Storage : Scaling up the ‘Gas Battery’ to balance Wind and Solar Power and provide Low Carbon Heat and Transport”.

The basic concept is that since wind and solar power are variable in output, there has to be some support from other energy technologies. Some talk of batteries to store electrical energy as a chemical potential, and when they talk of batteries they think of large Lithium ion piles, or flow batteries, or other forms of liquid electrolyte with cathodes and anodes. When I talk about batteries, I think of electrical energy stored in the form of a gas. This gas battery doesn’t need expensive metal cathodes or anodes, and it doesn’t need an acid liquid electrolyte to operate. Gas that is synthesised from excess solar or wind power can be a fuel that can be used in chemical reactions, such as combustion, or burning, to generate electricity and heat when desired at some point in the future. It could be burned in a gas turbine, a gas boiler or a fuel cell, or in a vehicle engine. Or instead, a chemically inert gas can be stored under pressure, and this compressed gas can also be used to generate power on demand at a later date by harnessing energy from decompression. Another option would be holding a chemically reactive gas under pressure, allowing two stages of energy recovery.

As expected, the Birkbeck audience was very diverse, and had different social and educational backgrounds, and so there was little that could be assumed as common knowledge, especially since the topic was energy, which is normally only an interest for engineers, or at a stretch, economists.

I decided when preparing that I would attempt to use symbolism as a tool to build a narrative in the presentation. A bold move, perhaps, but I found it created an emblematic thread that ran through the slides quite nicely, and helped me tell the story. I used Mathematical and Physical notation, but I didn’t do any Mathematics or Physics.

I introduced the first concept : the Delta, or change. I explained this delta was not the same as a river delta, which gave me the excuse to show a fabulous night sky image of the Nile Delta taken from the International Space Station. I demonstrated the triangle shape that emerges from charting data that changes over time, and calculating its gradient, such as the temperature of the Earth’s surface.

I explained that the change in temperature of the Earth’s surface over the recent decades is an important metric to consider, not just in terms of scale, but in terms of speed. I showed that this rate of change appears in all the independent data sets.

I then went on to explain that the overall trend in the change in the temperature of the Earth’s surface is not the only phenomenon. Within regions, and within years and seasons, even between months and days, there are smaller scale changes that may not look like the overall delta. A lot of these changes give the appearance of cyclic phenomena, and they can have a periodicity of up to several decades, for example, “oscillations” in the oceans.

These discrete deltas and cycles could, to a casual observer, mask underlying trends, especially as the deltas can be larger than the trends; so climatologists look at a large set of measurements of all kinds, and have shown that some deltas are one way only, and are not cycling.

Teasing out the trends in all of the observations is a major enterprise that has been accomplished by thousands of scientists who have reported to the IPCC, the Intergovernmental Panel on Climate Change, part of the UNFCCC, the United Nations Framework Convention on Climate Change. The Fifth Assessment Report is the most comprehensive yet, and shows that global warming is almost certainly ramping up – in other words, global warming is getting faster, or accelerating.

Many projections for the future of temperature changes at the Earth’s surface have been done, with the overall view that temperatures are likely to carry on rising for hundreds of years without an aggressive approach to curtail net greenhouse gas emissions to the atmosphere – principally carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O).

From observations, it is clear that global warming causes climate change, and that the rate of temperature change is linked to the rate of climate change. In symbols, this reads : delta T for temperature over t for time leads to, or implies, a delta C for climate over t for time. The fact that global warming and its consequential climate change are able to continue worsening under the current emissions profile means that climate change is going to affect humanity for a long stretch. It also means that efforts to rein in emissions will also need to extend over time.

I finished this first section of my presentation by showing a list of what I call “Solution Principles” :-

1. Delays embed and extend the problem, making it harder to solve. So don’t delay.

2. Solve the problem at least as fast as creating it.

3. For maximum efficiency, minimum cost, and maximum speed, re-deploy agents of the problem in its solution.

In other words, make use of the existing energy, transport, agriculture, construction and chemical industries in approaching answers to the imperative to address global warming and climate change.

I both love and loathe Geography at the same time. I squirm at the irregularities – not the Slartibartfastian squiggly coastlines – but the way that people of differing cultures, languages and political or religious adherences refuse to occupy territory neatly, and deny being categorised properly. Actually, no, that’s just a joke. I love diversity, and migration, and long may culture continue to evolve. I find the differing mental geographies of people intriguing – such as the rift between the climate change science community and those few shrill shills resisting climate change science; for some reason often the very same people ardently opposed to the deployment of renewable energy. How to communicate across psychological boundaries remains an ongoing pursuit that can be quite involving and rewarding sometimes, as the entrenched antis diminish in number, because of defections based on facts and logic. One day, I sense, sense will prevail, and that feels good.

So I like divergence and richness in culture, and I like the progress in communicating science. What I don’t like is trying to map things where there is so much temporal flux. The constantly rearranging list of Membership of the European Union, for one good and pertinent example; the disputes over territory names, sovereignty and belonginess. When it comes to Energy, things get even more difficult to map, as much data is proprietary (legally bound to a private corporation) or a matter of national security (so secret, not even the actual governments know it); or mythical (data invented on a whim, or guessed at, or out of date). And then you get Views – the different views of different organisations about which category of whatever whichever parties or materials belong to. In my struggle to try to understand petroleum crude oil production figures, I realised that different organiations have different ways of grouping countries, and even have different countries in similar-sounding groups.

So I decided that as a first step towards eliminating categorisation overlaps or omissions, I should establish my own geography which was flexible enough to accommodate the Views of others, and permit me to compare their data more knowingly. Here are my first versions :-

2. Country Regional Comparison
I have compared the definitions of territorial regions between the following organisations and agencies : JODI (Joint Organisations Data Initiative), BP plc (the international company formerly known as British Petroleum), OPEC (the Organization of Petroleum Exporting Countries), EIA (United States of America, Department of Energy, Energy Information Administration), IEA (International Energy Agency of the OECD Organisation for Economic Co-operation and Development) and the United Nations (UN). Here it is as an Excel spreadsheet (.XLS). And here it is as a Comma-Delimited text file (.CSV).

There are some differences. Surprisingly few, in fact, if you only consider countries with significant oil production. I did find quite a lot of spelling mistakes, however, even in documentation that I assume was partially machine-generated.

The result is that I can be fairly confident that if I separate out data for China, Mexico, Israel and Turkey and a few other less significant countries when I compare data sources, any large divergence in numbers will have to be down to the different ways that people count oil rather than the way they categorise territories.

Two of my concerns of the week are to try to understand the status and health of the global economy – which can be seen through the lens of overall consumption of hydrocarbons; and to see if there are changes happening in relative demand levels for the different kinds of hydrocarbons – as this could indicate a transition towards a lower carbon economy. The BP Stat Rev of June 2016 offers an interesting table on Page 13 – “Oil: Regional consumption – by product group”, which breaks down hydrocarbon demand into four main categories : Light distillates, Middle distillates, Fuel oil and Other. The “Other” category for BP includes LPG – Liquefied Petroleum Gases, a blend of mostly propane and butanes (carbon chain C3 and C4), which are gaseous and not liquid at normal room temperature and pressure – so strictly speaking aren’t actually oil. They also have different sources from various process units within petroleum refinery and Natural Gas processing plants. The “Other” category also includes refinery gas – mostly methane and ethane (carbon chain C1 and C2), and hydrogen (H2); and presumably fuel additives and improvers made from otherwise unwanted gubbins at the petrorefinery.

Not by coincidence, the JODI Oil database, in its Secondary data table, also offers a breakdown of hydrocarbon demand from refinery into categories almost analagous to the BP groupings – LPG, Gasoline, Naphtha, Kerosenes, Gas/Diesel oil, Fuel oil, and Other products; where LPG added to Other should be the same as BP’s “Other” category, Gasoline added to Naphtha should be equivalent to BP’s “Light distillates”; and Kerosenes added to Gas/Diesel oil should be analagous to BP’s “Middle distillates. So I set out to average the JODI Oil data, day-weighting the monthly data records, to see if I could replicate the BP Stat Rev Page 13.

Very few of the data points matched BP’s report. I suspect this is partly due to averaging issues – I expect BP has access to daily demand figures, (although I can’t be sure, and I don’t know their data sources); whereas the JODI Oil data is presented as monthly averages for daily demand. However, there are a lot of figures in the BP report that are high compared to the JODI Oil database. This can only partly be due to the fact that not all countries are reporting to JODI – four countries in the Commonwealth of Indepdendent States (CIS) – formerly known as “Former Soviet Union” – are not reporting, for example. I’m wondering if this over-reporting in the BP report might be due to differences in the way that stock transfers are handled – perhaps demand for refinery products that are intended for storage purposes rather than direct consumption is included in the BP data, but not in JODI – but at the moment I don’t have any relevant information with which to confirm or deny this concept.

Anyway, the data is very close between BP and JODI for the United States in recent years, and there are some other lines where there is some agreement (for example – Fuel oil in Japan, and Light distillates in China), so I am going to take this as an indication that I understand the JODI Oil data sufficiently well to be able to look at monthly refinery demand, refinery output and oil production for each region and hopefully reach some useful conclusions.

So, the Department of Energy and Climate Change (DECC) have a new top dog – Alex Chisholm – formerly the attack beast in charge of putting pressure on the electricity utility companies over their pricing rip-offs when at the Competition and Markets Authority (CMA).

There’s a huge and dirty intray awaiting this poor fellow, including the demonstrable failings of the Energy Act that’s just been signed into law. I’d recommend that he call for the immediate separation of the department into two distinct and individually funded business units : Nuclear and The Rest. Why ? Because nuclear power in the UK has nothing to do with answering the risk of climate change, despite some public relations type people trying to assert its “low carbon” status. Plus, the financial liabilities of the nuclear section of DECC mean it’s just going to bring the rest of the department down unless there’s a divorce.

The UK Government have been pursuing new fission nuclear power with reams of policy manoeuvres. The call for new nuclear power is basically a tautological argument centring on a proposal to transition to meet all energy demand by power generation resources, and the presumption of vastly increasing energy independence. If you want to convert all heating and cooling and transport to electricity, and you want to have few energy imports, then you will need to have a high level of new nuclear power. If new nuclear power can be built, it will generate on a consistent basis, and so, to gain the benefit of self-sufficiency, you will want to transfer all energy demand to electricity. Because you assume that you will have lots of new nuclear power, you need to have new nuclear power. It’s a tautology. It doesn’t necessarily mean it’s a sensible or even practical way to proceed.

DECC evolved mostly from the need to have a government department exclusively involved in the decommissioning of old nuclear power plants and the disposal of radioactive nuclear power plant waste and waste nuclear fuel. The still existing fleet of nuclear power plants is set to diminish as leaking, creaking, cracking and barely secure reactors and their unreliable steam generation equipment need to be shut down. At which point, this department will lose its cachet of being an energy provider and start to be merely an energy user and cash consumer – since there’s not enough money in the pot for essential decommissioning and disposal and DECC will need to go cap in hand to the UK Treasury for the next few decades to complete its core mission of nuclear decommissioning. It doesn’t take too much of a stretch of the imagination to figure out why this department will remain committed to the concept of new nuclear power. It would certainly justify the continuing existence of the department.

The flagship DECC-driven nuclear power project for Hinkley Point C has run aground on a number of sharp issues – including the apparent financial suicide of the companies set to build it, the probably illegal restructuring loans and subsidy arrangements that various governments have made, what appears to be the outright engineering incompetency of the main construction firm, and the sheer waste of money involved. It would be cheaper by around 50% to 70% to construct lots of new wind power and some backup gas-fired power generation plant – and could potentially be lower carbon in total – especially if the gas is manufactured low carbon gas.

In order to stand a chance of making any new low carbon energy investment in the UK, the Department of Energy and Climate Change needs to split – much like the banks have. The risky, nuclear stuff in one team, and the securely certainly advantageous renewable energy stuff in the other team. We will have more wind power, more solar power and more of lots of other renewables in the next 10 years. We are unlikely to see an increase in nuclear power generation in the UK for the next 15. It’s time to split these business units to protect our chances of successful energy investment.

In the United States, almost predictably in that uniquely litigious culture, various lawsuits are accumulating with the large oil and gas companies as their targets, and Exxon is the latest defendant. It is a matter of political, social and environmental import to have the facts where there is suspected misleading of the public on matters of science. In this case, if proved, those misled would include shareholders in the company.

And it’s not just a question of global warming science here – Exxon’s alleged readiness to obscure basic physics and the implications of carbon loading of the atmosphere from fossil fuel burning may have also resulted in an obscuring of the scientific realities underlying their own corporate viability.

You see, Exxon’s business interests rely on their continued ability to find and dig up oil and gas. Now last year was a difficult one, as depressed crude oil and Natural Gas commodity prices put some of Exxon’s resources “off-books”, so their reserves replacement – topping up their bankable assets – was only 67% of their previous end-of-year. It could be easy to connect the dots on this one – some of the gas they could pump is just too costly right now to get to. But what if Exxon are finally meeting another kind of Nemesis – of their own making – because they’re working on faulty geophysical data, which they produced themselves ?

So, let’s start where I did, with Chapter Eight “Basin stratigraphy” of the reference book “Basin Analysis” by Philip A. Allen and John R. Allen, 3rd edition, published by Wiley Blackwell, ISBN 978-0470673768.

The chapter introduces many important concepts regarding how sedimentary basins formed in deep Earth time – sediments of organic matter that have in some cases become reservoirs of fossil fuels. It talks about how strata get laid down – the science of “process stratigraphy”. Much of the logic relies on the phenomenon of the rising and falling of sea level relative to land masses over geological cycles, correlating with significant swings in climate. The book mentions early work by Exxon scientists : “Using seismic reflection results, a team of geologists and biostratigraphers from Exxon constructed a chart of relative sea level through time (Vail et al., (1997b), updated and improved by Haq et al. (1987, 1988)).” The chapter goes on to critique one important working assumption of that original work – that all sedimentary similarities must be an indicator of synchronicity – that is, that they happened at the same time. The text goes on to read, “In summary, we follow Carter (1998) in believing that the Haq et al. (1997) curve is a ‘noisy’ amalgam of a wide range of local sea-level signals, and should not be used as a global benchmark…its use as a chronostratigraphic tool by assuming a priori that a certain stratigraphic boundary has a globally synchronous and precise age, which it is therefore safe to extrapolate into a basin with poor age control, is hazardous.”

Why is this important ? Because all of the understanding of petroleum geophysics relies on the stratigraphic charts drawn up by these scientists. And yet, even at their inception, there was corporate “confidentiality” invoked. According to a paper from Anthony Hallam, Annual Review of Earth and Planetary Sciences, 1984, 12: 205-243 : “Most important, details of the evidence supporting the eustatic claims of the Exxon group (Vail et al 1977) are not published, and hence their claims cannot be checked directly”. What ? A data set relied on not only by everybody in the fossil fuel energy industry, but also all geologists and even climate change scientists, has a fault line in the evidence ? Why would Exxon want to obscure the origin of this data ? Did they need to keep quiet about their stratigraphy science because it revealed too much about climate change ? Are there problems with the science, but that even they didn’t find out ? And is there then the possibility that they have relied too much on faulty 40 year old research in fossil fuel exploration and discovery ?

Exxon might be starting to be more transparent – as this set of charts from 2010 reveals, “A Compilation of Phanerozoic Sea-Level Change, Coastal Onlaps and Recommended Sequence Designations”, Snedden and Liu, 2010, AAPG Search and Discovery, in which the text includes, “The magnitudes of sea-level change in this chart follow the estimation of Haq and Schutter (2008) and Hardenbol et al. (1998). However, there is little consensus on the range of sea-level changes, though most believe that the sea-level position during most of the Phanerozoic was within +/- 100 meters of the present-day level.”

To me, it remains an intriguing possibility that the whole oil and gas industry has been working with incomplete or misaligned data, in which case, can we really believe that there are another four or five good decades of good quality fossil fuels to exploit ?

Recently, I had a very helpful telephone conversation with somebody I shall call Ben – because that’s his name, obviously, so there’s no point in trying to camoflage that fact. It was a very positive conversation, with lots of personal energy from both parties – just the sort of constructive engagement I like.

Amongst a range of other things, we were batting about ideas for what could constitute a business model or economic case for the development of Renewable Gas production – whether Renewable Hydrogen or Renewable Methane. Our wander through the highways and byways of energy markets and energy policy led us to this sore point – that the National Grid is likely to resort to “fields of diesel generators” for some of its emergency backup for the power grid in the next few years – if new gas-fired power plants don’t get built. Various acronyms you might find in this space include STOR and BM.

Now, diesel is a very dirty fuel – so dirty that it appears to be impossible to build catalytic exhaust filters for diesel road vehicles that meet any of the air pollution standards and keep up fuel consumption performance. It’s not just VW that have had trouble meeting intention with faction – all vehicle manufacturers have difficulties balancing all the requirements demanded of them. Perhaps it’s time to admit that we need to ditch the diesel fuel itself, rather than vainly try to square the circle.

The last thing we really need is diesel being used as the fuel to prop up the thin margins in the power generation network – burned in essentially open cycle plant – incurring dirty emissions and a massive waste of heat energy. Maybe this is where the petrorefiners of Great Britain could provide a Renewable Gas alternative. Building new plant or reconfiguring existing plant for Renewable Gas production would obviously entail capital investment, which would create a premium price on initial operations. However, in the event of the National Grid requiring emergency electricity generation backup, the traded prices for that power would be high – which means that slightly more expensive Renewable Gas could find a niche use which didn’t undermine the normal economics of the market.

If there could be a policy mandate – a requirement that Renewable Gas is used in open cycle grid-balancing generation – for example when the wind dies down and the sun sets – then we could have fields of Renewable Gas generators and keep the overall grid carbon emissions lower than they would otherwise have been.

Both Ben and I enjoyed this concept and shared a cackle or two – a simple narrative that could be adopted very easily if the right people got it.

I have had the great fortune to meet another student of the Non-Science of Economics who believes most strongly that Energy is only a sub-sector of the Holy Economy, instead of one of its foundations, and doesn’t understand why issues with the flow of commodities (which include energy resources) into the system is critical to the survival of the global economy, and that the growth in the Services Industries and Knowledge Economy cannot compensate for the depletion of freshwater, fossil fuels and other raw resources.

This person believes in Technology, as if it can fly by itself, without seeming to understand how Technological Innovation is really advanced by state investment – a democracy of focus. This otherwise intelligent learner has also failed to grasp, apparently, that the only way that the Economy can grow in future is through investment in things with real value, such as Energy, especially where this investment is essential owing to decades of under-investment precipitated by privatisation – such as in Energy – investment in both networks of grids or pipes, and raw resources. And this from somebody who understands that developing countries are being held back by land grab and natural resource privatisation – for example ground water; and that there is no more money to be made from property investment, as the market has boomed and blown.

How to burst these over-expanded false value bubbles in the mind ? When I try to talk about the depletion of natural resources, and planetary boundaries, people often break eye contact and stare vacantly out of the nearest window, or accept the facts, but don’t see the significance of them. Now this may be because I’m not the best of communicators, or it may be due to the heavy weight of propaganda leading to belief in the Magical Unrealism always taught in Economics and at Business Schools.

Whatever. This is where I’m stuck in trying to design a way to talk about the necessity of energy transition – the move from digging up minerals to catching the wind, sunlight and recycling gases. If I say, “Look, ladies and laddies, fossil fuels are depleting”, the audience will respond with “where there’s a drill, there’s a way”. As if somehow the free market (not that a free market actually exists), will somehow step up and provide new production and new resources, conjuring them from somewhere.

What are arguments that connect the dots for people ? How to demonstrate the potential for a real peak in oil, gas, coal and uranium production ? I think I need to start with a basic flow analysis. On the one side of the commodity delivery pipeline, major discoveries have decreased, and the costs of discovery have increased. The hidden underbelly of this is that tapping into reservoirs and seams has a timeline to depletion – the point at which the richness of the seam is degraded significantly, and the initial pressure in the well or reservoir is reduced to unexploitable levels – regardless of the technology deployed. On the other end of the commodities pipeline is the measure of consumption – and most authorities agree that the demand for energy will remain strong. All these factors add up to a time-limited game.

Oh, you can choose to believe that everything will continue as it always seems to have. But the Golden Age of Plenty is drawing to a close, my friend.

Although the Autumn Statement and the Spending Review are attracting all the media and political attention, I have been more interested by the UK Government’s Security Review – or to give it is full title : the “National Security Strategy and Strategic Defence and Security Review 2015”, or (SDSR), document number Cm 9161.

Its aim is stated in its sub-heading “A Secure and Prosperous United Kingdom”, but on matters of energy, I would suggest it fails to nail down security at all.

My next probe is into the global gas pipeline networks indicated by this mention of the “Southern Gas Corridor” in Section 3.40 : “…measures to protect and diversify sources of [energy] supply will become increasingly important, including the new Southern Corridor pipeline, US liquid natural gas (LNG) exports, further supplies of Australian LNG, and increased supply from Norway and North Africa.”

First of all, and perhaps of secondmost importance, the “Southern Gas Corridor” is more of a European Union policy suite than an individual pipeline. In fact, it’s not just one pipeline – several pipelines are involved, some actual, some under construction, some cancelled, some renamed, some re-routed, and some whose development is threatened by geopolitical struggle and even warfare.

It is this matter of warfare that is the most important in considering the future of Natural Gas being supplied to the European Union from the Caspian Sea region : Turkmenistan, Iran, Kazakhstan, Georgia and Azerbijan. Oh, and we should mention Uzbekistan, and its human rights abuses, before moving on. And Iraq and Syria – where Islamic State sits, brooding.

Natural Gas is probably why we are all friends with Iran again. Our long-lasting dispute with Iran was ostensibly about nuclear power, but actually, it was all about Natural Gas. When Russia were our New Best Friend, Iran had to be isolated. But now Russia is being a tricky trading partner, and being beastly to Ukraine, Iran is who we’ve turned to, to cry on their shoulder, and beg for an alternative source of gas.

So we’ve back-pedalled on the concept of waging economic or military conflict against Iran, so now we have a more southerly option for our massive East-to-West gas delivery pipeline project – a route that takes in Iran, and avoids passing through Georgia and Azerbaijan – where Russia could interfere.

The problem with this plan is that the pipeline would need to pass through Syria and/or southern Turkey at some point. Syria is the country where Islamic State is currently being bombed by the United States and some European countries. And Turkey is the country where there has been a revival of what amounts pretty much to civil war with the Kurdish population – who also live in Iraq (and the edges of Syria and Iran).

Russia is envious of the southerly Southern Gas Corridor plan, and jealous of its own version(s) of the gas-to-Europe project, and influence in Georgia and Azerbaijan. So perhaps we should not be surprised that Russia and Turkey have had several military and political stand-offs in the last few months.

We in the United Kingdom should also be cautious about getting dragged into military action in Syria – if we’re thinking seriously about future energy security. Further destabilisation of the region through military upheaval would make it difficult to complete the Southern Gas Corridor, and make the European Union increasingly dependent on Russia for energy.

In the UK, although we claim to use no Russian gas at all, we do get gas through the interconnectors from The Netherlands and Belgium, and they get gas from Russia, so actually, the UK is using Russian gas. The UK gets over half its Natural Gas from Norway, and Norway has been a strong producer of Natural Gas, so why should we be worried ? Well, it appears that Norwegian Natural Gas production may have peaked. Let’s re-visit Section 3.40 one more time : “…measures to protect and diversify sources of [energy] supply will become increasingly important, including the new Southern Corridor pipeline, US liquid natural gas (LNG) exports, further supplies of Australian LNG, and increased supply from Norway and North Africa.”

The problem is that nobody can fight geology. If Norway has peaked in Natural Gas production, there is little that anyone can do to increase it, and even if production could be raised in Norway through one technique or another (such as carbon dioxide injection into gas wells), it wouldn’t last long, and wouldn’t be very significant. Norway is going to continue to supply gas to its other trading partners besides the UK, so how could the UK commandeer more of the Norwegian supply ? It seems likely that “increased supply from Norway” is just not possible.

But back to the Southern Gas Corridor. It is in the United Kingdom’s security interests to support fresh gas supplies to the European Union. Because we may not be able to depend on Russia, we need the Southern Gas Corridor. Which is why we should think very, very carefully before getting involved in increased military attacks on Syria.

For example, the report states in Section 3.40 that : “…measures to protect and diversify sources of [energy] supply will become increasingly important, including the new Southern Corridor pipeline, US liquid natural gas (LNG) exports, further supplies of Australian LNG, and increased supply from Norway and North Africa.”

I have already addressed my recommendation that the writers of this report should be more careful to distinguish between Liquefied Natural Gas (LNG) which is a methane-rich product that can substitute for Natural Gas; and Natural Gas Liquids (NGLs) which is a methane-poor product that cannot substitute for Natural Gas.

However, assuming that the writers of the report are talking about cryogenically stored and transported Natural Gas-sourced energy gases, there is a problem in assuming that the United States will be exporting any large amounts of LNG to Europe any time soon. In fact, there are several problems.

Just because the business and political press have been touting the exciting prospect of US LNG exports, doesn’t mean that the data backs up this meme.

All of which adds up to a puzzled look on my face. How can the British Government reasonably expect the commencement of significant quantities of American LNG exports to arrive in the UK ? The only reason they believe this is because there has been American propaganda, promulgated through media of all kinds, for the last five or so years, to convince the world that the USA can achieve greater energy independence through the “explosion” in shale gas production.

It’s a story told by many successive US Governments – that the US can achieve greater energy independence, but the reality is very, very different.

The UK Government should not believe any narrative of this nature, in my view, nor include it in national security analyses.

Our assiduous government in the United Kingdom has conducted a national security review, as they should, but it appears the collective intelligence on energy of the Prime Minister’s office, the Cabinet Office and the Foreign Commonwealth Office is on a scale of poor to dangerously out of date.

Natural Gas Liquids, or NGLs, are condensable constituents of gas-prone hydrocarbon wells. In other words, the well in question produces a lot of gas, but at the temperatures and pressures in the well underground, hydrocarbons that would normally be liquid on the surface are in the gas phase, underground. But when they are pumped/drilled out, they are condensed to liquids. So, what are these chemicals ? Well, here are the approximate Boiling Points of various typical fossil hydrocarbons, approximate because some of these molecules have different shapes and arrangements which influences their physical properties :-

You would expect NGLs, liquids condensed out of Natural Gas, to be mostly butane and heavier molecules, but depending on the techniques used – which are often cryogenic – some propane and ethane can turn up in NGLs, especially if they are kept cold. The remaining methane together with small amounts of ethane and propane and a trace of higher hydrocarbons is considered “dry” Natural Gas.

By contrast, LNG is produced by a process that chills Natural Gas without separating the methane, until it is liquid, and takes up a much smaller volume, making it practical for transportation. OK, you can see why mistakes are possible. Both processes operate at sub-zero temperatures and result in liquid hydrocarbons. But it is really important to keep these concepts separate – especially as methane-free liquid forms of short-chain hydrocarbons are often used for non-energy purposes.

Amongst other criticisms I have of this report, it is important to note that the UK’s production of crude oil and Natural Gas is not “gradually” declining. It is declining at quite a pace, and so imports are “certain” to grow, not merely “likely”. I note that Natural Gas production decline is not mentioned, only oil.

The energy “trilemma” is the dilemma of three dimensions : how to decarbonise the energy system, whilst continuing to provide affordable energy to consumers, at a high security of supply. The unspoken fourth dimension is that of investment : just who is going to invest in British energy, particularly if green energy booster subsidies and regulatory measures are binned ? The UK Government have in the past few years believed that they need to support new investment in new technologies, but it looks likely that this drive is about to lose all its incentives.

At last week’s Energy Live News conference, Andrea Leadsom, Minister of State for Energy at the UK Government’s Department of Energy and Climate Change (DECC), headed up the morning, with a bit of a lead in from ELN Editor Sumit Bose. He said that continuing challenges arose from the optimisation of balancing reserves and demand side management in electricity generation. He said that policy had perhaps swung away from the projection of 100% electrification of British energy, as this would require at least 15% more committed capital expenditure – although there would be savings to be had in operational expenditure. He also said that there is an ongoing budgetary conflict going on in government departments about the public money available to spend on investment in infrastructure (including that for energy). Obviously, the announcement of the Infrastructure Commission is going to help in a number of areas – including reaching for full electrification of the railways – a vital project. Then he introduced the Minister.

Andrea Leadsom said, “This government is determined to resolve the energy trilemma, decarbonising at the lowest cost to the consumer whilst keeping the lights on. In the past we did tend to have crazes on different technologies….”. At this point I wondered if she included nuclear power in that set of crazes, but her later remarks confirmed she is still entrenched in that fad.

Leadsom said, “There’s been a big move to renewable energy technologies, and quite rightly too. We need a wide diversity of electricity sources. We need to try and improve the new nuclear programme…”, at which point I thought to myself, “Good luck with that !”. She said, “Renewable energy has trebled. We need [to fund] that transition from unabated coal, [turn on to] gas and renewables. [But] as we saw yesterday – there is an intermittency of renewables.”

Andrea Leadsom was referring to the previous day, when National Grid has issued their first call for surplus top-up power generation since 2012. Owing to a confluence of weather systems over the UK, the atmosphere was becalmed, and wind power output was close to zero. However, this had already been predicted to happen. The lack of wind power was not the problem.

The problem lay in two other areas. Of the completely inflexible nuclear power plants, three generators were out of action for scheduled maintenance (Hunterston B, Reactor 3; Heysham 1, Reactor 1 and Hartlepool Reactor 1). And so when two coal-fired power plants which normally would have been operational were out of action, and one failed apparently between 12:45pm and 12:51pm (Eggborough, Fiddlers and Rugeley according to various sources) dropping approximately 640 megawatts (MW) out of the system (according to BM Reports data), National Grid had to resort to elements of their balancing “toolkit” that they would not normally use.

The operators generating for the National Grid were able to ramp up Combined Cycle Gas Turbine (CCGT), and various large electricity users with special arrangements with National Grid were stopped using power. By around 18:00 6pm the emergency was over, with peak demand for the evening levelling off at around 48 gigawatts (GW).

Although National Grid handled the problem well, there was a serious risk of blackouts, but again, not because of wind power.

If during the period of supply stress, one of the nuclear power plants had suddered an outage, that would have created the “nightmare scenario”, according to Peter Atherton, from Jefferies, quoted in The Guardian newspaper. The reason for this is that the nuclear power plants are large generators, or “baseload” generators. They have suffered from problems of unreliability over the recent years, and whenever they shutdown, either in a planned or an unplanned manner, they cause the power grid a massive headache. The amount of power lost is large, and there’s sometimes no guarantee of when the nuclear generation can be restored. In addition, it takes several hours to ramp up replacement gas-fired power plants to compensate for the power lost from nuclear.

Yes, Andrea Leadsom, more renewable energy is essential to meet decarbonisation goals. Yes, Andrea Leadsom, renewable energy technologies have an inherent intermittency or variability in their output. No, Andrea Leadsom, National Grid’s problems with power generation during the winter months is not caused by wind power on the system – wind power is providing some of the cheapest resources of electricity. No, Andrea Leadsom, insecurity in Britain’s power supply is being caused by ageing nuclear and coal power plants, and the only way to fix that is to create incentives to develop a plethora of differently-scaled generation facilities, including many more decentralised renewable energy utilities, flexible top-up backup gas-fired power plants, including Combined Heat and Power town-scale plants, and Renewable Gas production and storage facilities.

Everything in the UK world of energy hit a kind of slow-moving nightmare when the Department of Energy and Climate Change stopped replying to emails a few months ago, claiming they were officially ordered to focus on the “Spending Review” – as known as “The Cuts” – as ordered by George Osborne, Chancellor of Her Majesty’s Treasury.

We now know that this purdah will be terminated on 25th November 2015, when various public announcements will be made, and whatever surprises are in store, one thing is now for certain : all grapevines have been repeating this one word regarding British energy policy : “reset”.

Some are calling it a “soft reset”. Some are predicting the demise of the entire Electricity Market Reform, and all its instruments – which would include the Capacity Auction and the Contracts for Difference – which would almost inevitably throw the new nuclear power ambition into a deep dark forgettery hole.

A report back from a whispering colleague regarding the Energy Utilities Forum at the House of Lords on 4th November 2015 included these items of interest :-

“…the cost of battery power has dropped to 10% of its value of a few years ago. National Grid has a tender out for micro-second response back up products – everyone assumes this is aimed at batteries but they are agnostic … There will be what is called a “soft reset” in the energy markets announced by the government in the next few weeks – no one knows what this means but obviously yet more tinkering with regulations … On the basis that diesel fuel to Afghanistan is the most expensive in the world (true), it has to be flown in, it has been seriously proposed to fly in Small Modular Nuclear reactors to generate power. What planet are these people living on I wonder ? … A lot more inter connectors are being planned to UK from Germany, Belgium Holland and Norway I think taking it up to 12 GWe … ”

Alistair Phillips-Davies, the CEO of SSE (Scottish and Southern Energy), took part in a panel discussion at Energy Live News on 5th November 2015, in which he said that he was expecing a “reset” on the Electricity Market Reform (EMR), and that the UK Government were apparently focussing on consumers and robust carbon pricing. One view expressed was that the EMR could be moved away from market mechanisms. In other discussions, it was mentioned that the EMR Capacity Market Auction had focussed too much on energy supply, and that the second round would see a wider range of participants – including those offering demand side solutions.

Energy efficiency, and electricity demand profile flattening, were still vital to get progress on, as the power grid is going to be more efficient if it can operate within a narrower band of demand – say 30 to 40 GW daily, rather than the currently daily swing of 20 to 50 GW. There was talk of offering changing flexible, personal tariffs to smooth out the 5pm 17:00 power demand peak, as price signalling is likely to be the only way to make this happen, and comments were made about how many computer geeks would be needed to analyse all the power consumption data.

The question was asked whether the smart meter rollout could have the same demand smoothing effect as the Economy 7 tariff had in the past.

The view was expressed that the capacity market had not provided enough by way of long-term price signals – particularly for investment in low carbon energy. One question raised during the day was whether it wouldn’t be better just to set a Europe-wide price on carbon and then let markets and the energy industry decide what to put in place ?

So, in what ways could the British Government “reset” the Electricity Market Reform instruments in order to get improved results – better for pocket, planet and energy provision ? This is what I think :-

1. Keep the Capacity Mechanism for gas

The Capacity Mechanism was originally designed to keep efficient gas-fired power plants (combined cycle gas turbine, or CCGT) from closing, and to make sure that new ones were built. In the current power generation portfolio, more renewable energy, and the drive to push coal-fired power plants to their limits before they need to be closed, has meant that gas-fired generation has been sidelined, kept for infrequent use. This has damaged the economics of CCGT, both to build and to operate. This phenomenon has been seen all across Europe, and the Capacity Market was supposed to fix this. However, the auction was opened to all current power generators as well as investors in new plant, so inevitably some of the cash that was meant for gas has been snaffled up by coal and nuclear.

2. Deflate strike prices after maximum lead time to generation

No Contracts for Difference should be agreed without specifying a maximum lead time to initial generation. There is no good reason why nuclear power plants, for example, that are anticipated to take longer than 5 years to build and start generating should be promised fixed power prices – indexed to inflation. If they take longer than that to build, the power prices should be degressed for every year they are late, which should provide an incentive to complete the projects on time. These projects with their long lead times and uncertain completion dates are hogging all the potential funds for investment, and this is leading to inflexibility in planning.

3. Offer Negative Contracts for Difference

To try to re-establish a proper buildings insulation programme of works, projects should be offered an incentive in the form of contracts-for-energy-savings – in other words, aggregated heat savings from any insulation project should be offered an investment reward related to the size of the savings. This will not be rewarding energy production, but energy use reduction. Any tempering of gas demand will improve the UK’s balance of payments and lead to a healthier economy.

4. Abandon all ambition for carbon pricing

Trends in energy prices are likely to hold surprises for some decades to come. To attempt to set a price on carbon, as an aid to incentivising low carbon energy investment is likely to fail to set an appropriate investment differential in this environment of general energy pricing volatility. That is : the carbon price would be a market signal lost in a sea of other effects. Added to which, carbon costs are likely to be passed on to energy consumers before they would affect the investment decisions of energy companies.

Status-checking questions. I’m sure we all have them. I certainly do. Several times a week, or even day, I ask myself two little questions of portent : “What am I doing ?” and “Why am I here ?”. I ask myself these questions usually because my mind’s wandered off again, just out of reach, and I need to call myself to attention, and focus. I ask these little questions of myself when I do that thing we all do – I’ve set off with great purpose into another room, and then completely forgotten why I went there, or what I came to find or get. I also use these forms of enquiry when I’m at The Crossroads of Purpose – to determine what exactly it is I’m deciding to aim for. What are my goals this day, week, month, age ? Can I espy my aims, somewhere on the horizon ? Can I paddle labouriously towards them – against the tide – dodge/defeat the sharks ? Can I muster the will to carry this out – “longhauling it” ?

I’ve spent a long time writing a book, which I’m sure to bore everybody about for the next aeon. My intention in writing the book was to stimulate debate about what I consider to be the best direction for balanced energy systems – a combination of renewable electricity and Renewable Gas. I wanted to foster debate amongst the academics and engineers who may be my peers, certainly, hopefully providing a little seed for further research. Hopefully also having a small influence on energy policy, perhaps, or at least, getting myself and my ideas asked to various policy meetings for a little airing. But, if I could in some way, I also wanted to offer a bit of fizz to the internal conversations of companies in the energy sector. You see, it may be obvious, or it may not be, but action on climate change, which principally involves the reduction in the mining, drilling and burning of fossil fuels, principally also involves the co-operation of the fossil fuel extraction companies. Their products are nearly history, and so it must be that inside the headquarters of every transnational energy giant, corporate heads are churning through their options with a very large what-if spoon.

She writes, “The ambit claims know no bounds. Who else would ask for $89,000,000,000,000? If the evil “more developed” nations pay for their carbon sins, the bill for those 1.3 billion people works out at $70,000 per person by 2030 (babies included).”

“The global economy will require substantial investments in infrastructure as the population and the middle class grow. An estimated US$89 trillion of infrastructure investment will be required through 2030, based on data from the International Energy Agency (IEA), the Organisation for Economic Co-operation and Development (OECD), and analysis for the Commission (see Figure 1). This is chiefly investment in energy and cities. This estimate for the required investment is before accounting for actions to combat climate change.”

That’s before accounting for actions to combat climate change, Ms Nova. Before. I know it’s probably clanging against your internal cognitive fences, but the fact is, the world needs to spend a heap of capital in the next 20 to 30 years reviving, replacing and renewing energy systems infrastructure. That spending has to happen regardless of whether it’s low carbon spending.

And let’s read the note on Figure 1 more carefully :-

“INCLUDING OPERATING EXPENDITURES WOULD MAKE A LOW-CARBON TRANSITION EVEN MORE FAVOURABLE LEADING TO A FURTHER REDUCTION OF US$5 TRILLION, FOR OVERALL POTENTIAL SAVINGS OF US$1 TRILLION”

So, Jo Nova, the world will actually be better off if it decides to make all new energy expenditure low carbon.

I was to join industrial developers and academic researchers at the Department of Energy and Climate Change (DECC) in a meeting of the “Green Hydrogen Standard Working Group”.

The date was 12th June 2015. The weather was sunny and hot and merited a fine Italian lemonade, fizzing with carbon dioxide. The venue was an air-conditioned grey bunker, but it wasn’t an unfriendly dungeon, particularly as I already knew about half the people in the room.

The subject of the get-together was Green Hydrogen, and the work of the group is to formulate a policy for a Green Hydrogen standard, navigating a number of issues, including the intersection with other policy, and drawing in a very wide range of chemical engineers in the private sector.

My reputation for not putting up with any piffle clearly preceded me, as somebody at the meeting said he expected I would be quite critical. I said that I would not be saying anything, but that I would be listening carefully. Having said I wouldn’t speak, I must admit I laughed at all the right places in the discussion, and wrote copious notes, and participated frequently in the way of non-verbal communication, so as usual, I was very present. At the end I was asked for my opinion about the group’s work and I was politely congratulational on progress.

So, good. I behaved myself. And I got invited back for the next meeting. But what was it all about ?

Most of what it is necessary to communicate is that at the current time, most hydrogen production is either accidental output from the chemical industry, or made from fossil fuels – the main two being coal and Natural Gas.

Hydrogen is used extensively in the petroleum refinery industry, but there are bold plans to bring hydrogen to transport mobility through a variety of applications, for example, hydrogen for fuel cell vehicles.

Clearly, the Green Hydrogen standard has to be such that it lowers the bar on carbon dioxide (CO2) emissions – and it could turn out that the consensus converges on any technologies that have a net CO2 emissions profile lower than steam methane reforming (SMR), or the steam reforming of methane (SRM), of Natural Gas.

[ It’s at this very moment that I need to point out the “acronym conflict” in the use of “SMR” – which is confusingly being also used for “Small Modular Reactors” of the nuclear fission kind. In the context of what I am writing here, though, it is used in the context of turning methane into syngas – a product high in hydrogen content. ]

Some numbers about Carbon Capture and Storage (CCS) used in the manufacture of hydrogen were presented in the meeting, including the impact this would have on CO2 emissions, and these were very intriguing.

I had some good and useful conversations with people before and after the meeting, and left thinking that this process is going to be very useful to engage with – a kind of dragnet pulling key players into low carbon gas production.

Here follow my notes from the meeting. They are, of course, not to be taken verbatim. I have permission to recount aspects of the discussion, in gist, as it was an industrial liaison group, not an internal DECC meeting. However, I should not say who said what, or which companies or organisations they are working with or for.

The British Government do not have an energy policy. They may think they have one, and they may regularly tell us that they have one, but in reality, they don’t. There are a number of elements of regulatory work and market intervention that they are engaged with, but none of these by itself is significant enough to count as a policy for energy. Moreover, all of these elements taken together do not add up to energy security, energy efficiency, decarbonisation and affordable energy.

What it takes to have an energy policy is a clear understanding of what is a realistic strategy for reinvestment in energy after the dry years of privatisation, and a focus on energy efficiency, and getting sufficient low carbon energy built to meet the Carbon Budget on time. Current British Government ambitions on energy are not realistic, will not attract sufficient investment, will not promote increased energy efficiency and will not achieve the right scale and speed of decarbonisation.

I’m going to break down my critique into a series of small chunks. The first one is a quick look at the numbers and outcomes arising from the British Government’s obsessive promotion of nuclear power, a fantasy science fiction that is out of reach, not least because the industry is dog-tired and motheaten.

The Electricity Market Reform of the Energy Act enacted in the last parliament included a facility for “Contracts for Difference” (CfD), an auction for government subsidies. Solar photovoltaic projects bid successfully, but the generation capacity was low, and today I learned that some of these projects could be at risk of non-completion.

The CfD auction is for large solar schemes. Smaller schemes, such as those for residential housing, still have the Feed in Tariff to support them – however the meeting considered the impact on growth in this area owing to step change degression in this subsidy support.

If the failure of the CfD and FiT to stimulate wider uptake of solar power wasn’t concerning enough, the meeting looked at issues with grid connection for new renewable energy projects. This was shown to be the result of a “perfect storm” of low ambition in government, underestimates of growth, long lead times for connection processes, uncertainties in guarantees for connection, and the long turnaround time for pushing through technological changes.

Several people that I spoke to in the breaks highlighted physical problems in the grid network that mean that the power grid is “full” through large parts of the South West of England, the Midlands and southern Wales. One person ventured that the problem could easily be getting worse in Scotland, where enormous wind power projects have begun to saturate the grid connections to England. And the view held by some was that this problem has a four year lead time to fix.

If the Conservative Government wants to grow solar power, besides managing the massively complex web of actors in the solar power industry, it’s going to need to show more oversight of this vital physical barrier – the electricity grid is in sore need of major improvement and expansion, and without this, solar will be going nowhere.

Shell, BP and some of their confederates in the European oil and gas industry have inched, or perhaps “centimetred”, forward in their narrative on climate change. Previously, the major oil and gas companies were regularly outed as deniers of climate change science; either because of their own public statements, or because of secretive support of organisations active in denying climate change science. It does seem, finally, that Shell in particular has decided to drop this counter-productive “playing of both sides”. Not that there are any “sides” to climate change science. The science on climate change is unequivocal : changes are taking place across the world, and recent global warming is unprecedented, and has almost definitely been attributed to the burning of fossil fuels and land use change.

So Shell and BP have finally realised that they need to shed the mantle of subtle or not-so-subtle denial, although they cling to the shreds of dispute when they utter doubts about the actual numbers or impacts of global warming (for example : http://www.joabbess.com/2015/06/01/shells-public-relations-offensive/). However, we have to grant them a little leeway on that, because although petrogeologists need to understand the science of global warming in order to know where to prospect for oil and gas, their corporate superiors in the organisation may not be scientists at all, and have no understanding of the global carbon cycle and why it’s so disruptive to dig up all that oil and gas hydrocarbon and burn it into the sky. So we should cut the CEOs of Shell and BP a little slack on where they plump for in the spectrum of climate change narrative – from “utter outright doom” to “trifling perturbation”. The central point is that they have stopped denying climate change. In fact, they’re being open that climate change is happening. It’s a miracle ! They have seen the light !

But not that much light, though. Shell and BP’s former position of “scepticism” of the gravity and actuality of global warming and climate change was deployed to great effect in delaying any major change in their business strategies. Obviously, it would have been unseemly to attempt to transmogrify into renewable energy businesses, which is why anybody in the executive branches who showed signs of becoming pro-green has been shunted. There are a number of fairly decent scalps on the fortress pikes, much to their shame. Shell and BP have a continuing duty to their shareholders – to make a profit from selling dirt – and this has shelved any intention to transition to lower carbon energy producers. Granted, both Shell and BP have attempted to reform their internal businesses by applying an actual or virtual price on carbon dioxide emissions, and in some aspects have cleaned up and tidied up their mining and chemical processing. The worsening chemistry of the cheaper fossil fuel resources they have started to use has had implications on their own internal emissions control, but you have to give them credit for trying to do better than they used to do. However, despite their internal adjustments, their external-facing position of denial of the seriousness of climate change has supported them in delaying major change.

With these recent public admissions of accepting climate change as a fact (although CEOs without appropriate science degrees irritatingly disagree with some of the numbers on global warming), it seems possible that Shell and BP have moved from an outright “delay and deny” position, which is to be applauded.

However, they might have moved from “delay and deny” to “delay and distract”. Since the commencement of the global climate talks, from about the 1980s, Shell and BP have said the equivalent of “if the world is serious about acting on global warming (if global warming exists, and global warming is caused by fossil fuels), then the world should agree policy for a framework, and then we will work within that framework.” This is in effect nothing more than the United Nations Framework Convention on Climate Change (UNFCCC) has put forward, so nobody has noticed that Shell and BP are avoiding taking any action themselves here, by making action somebody else’s responsibility.

Shell and BP have known that it would take some considerable time to get unanimity between governments on the reality and severity of climate change. Shell and BP knew that it would take even longer to set up a market in carbon, or a system of carbon dioxide emissions taxation. Shell and BP knew right from the outset that if they kept pushing the ball back to the United Nations, nothing would transpire. The proof of the success of this strategy was the Copenhagen conference in 2009. The next proof of the durability of this delaying tactic will be the outcomes of the Paris 2015 conference. The most that can come out of Paris is another set of slightly improved targets from governments, but no mechanism for translating these into real change.

Shell and BP and the other oil and gas companies have pushed the argument towards a price on carbon, and a market in carbon, and expensive Carbon Capture and Storage technologies. Not that a price on carbon is likely to be anywhere near high enough to pay for Carbon Capture and Storage. But anyway, the point is that these are all distractions. What really needs to happen is that Shell and BP and the rest need to change their products from high carbon to low carbon. They’ve delayed long enough. Now is the time for the United Nations to demand that the fossil fuel companies change their products.

This demand is not just about protecting the survival of the human race, or indeed, the whole biome. Everybody is basically on the same page on this : the Earth should remain liveable-inable. This demand for change is about the survival of Shell and BP as energy companies. They have already started to talk about moving their businesses away from oil to gas. There are high profile companies developing gas-powered cars, trains, ships and possibly even planes. But this will only be a first step. Natural Gas needs to be a bridge to a fully zero carbon world. The oil and gas companies need to transition from oil to gas, and then they need to transition to low carbon gas.

Renewable Gas is not merely “vapourware” – the techniques and technologies for making low carbon gas are available, and have been for decades, or in some cases, centuries. Shell and BP know they can manufacture gas instead of digging it up. They know they can do the chemistry because they already have to do much of the same chemistry in processing fossil hydrocarbons now to meet environmental and performance criteria. BP has known since the 1970s or before that it can recycle carbon in energy systems. Shell is currently producing hydrogen from biomass, and they could do more. A price on carbon is not going to make this transition to low carbon gas. While Shell and BP are delaying the low carbon transition by placing focus on the price of carbon, they could lose a lot of shareholders who shy away from the “carbon bubble” risk of hydrocarbon investment. Shell and BP need to decide for themselves that they want to survive as energy companies, and go public with their plans to transition to low carbon gas, instead of continuing to distract attention away from themselves.

Supporters of pricing carbon dioxide emissions urge the “give it time” approach, believing that continuing down the road of tweaking the price of energy in the global economy will cause a significant change in the types of resources being extracted.

My view is that economic policy and the strengthening of carbon markets and cross-border carbon taxes cannot provide a framework for timely and major shifts in the carbon intensity of energy resources, and here’s a brief analysis of why.

1. A price on carbon shifts the locus of action on to the energy consumer and investor

A price on carbon could be expected to alter the profitability of certain fossil fuel mining, drilling and processing operations. For example, the carbon dioxide emissions of a “tank of gas” from a well-to-wheel or mine-to-wheel perspective, could be made to show up in the price on the fuel station forecourt pump. Leaving aside the question of how the carbon tax or unit price would be applied and redistributed for the moment, a price on carbon dioxide emissions could result in fuel A being more expensive than fuel B at the point of sale. Fuel A could expect to fall in popularity, and its sales could falter, and this could filter its effect back up the chain of production, and have implications on the capital expenditure on the production of Fuel A, and the confidence of the investors in investing in Fuel A, and so the oil and gas company would pull out of Fuel A.

However, the business decisions of the oil and gas company are assumed to be dependent on the consumer and the investor. By bowing to the might god of unit price, Shell and its confederates are essentially arguing that they will act only when the energy consumers and energy investors act. There are problems with this declaration of “we only do what we are told by the market” position. What if the unit price of Fuel A is only marginally affected by the price on carbon ? What if Fuel A is regarded as a superior product because of its premium price or other marketing factors ? This situation actually exists – the sales of petroleum oil-based gasoline and diesel are very healthy, despite the fact that running a car on Natural Gas, biogas or electricity could be far cheaper. Apart from the fact that so many motor cars in the global fleet have liquid fuel-oriented engines, what else is keeping people purchasing oil-based fuels when they are frequently more costly than the alternative options ?

And what about investment ? Fuel A might become more costly to produce with a price on carbon, but it will also be more expensive when it is sold, and this could create an extra margin of profit for the producers of Fuel A, and they could then return higher dividends to their shareholders. Why should investors stop holding stocks in Fuel A when their rates of return are higher ?

If neither consumers nor investors are going to change their practice because Fuel A becomes more costly than Fuel B because of a price on carbon, then the oil and gas company are not going to transition out of Fuel A resources.

For Shell to urge a price on carbon therefore, is a delegation of responsibility for change to other actors. This is irresponsible. Shell needs to lead on emissions reduction, not insist that other people change.

2. A price on carbon will not change overall prices or purchasing decsions

In economic theory, choices about products, goods and services are based on key factors such as trust in the supplier, confidence in the product, availability and sustainability of the service, and, of course, the price. Price is a major determinant in most markets, and artificially altering the price of a vital commodity will certainly alter purchasing decisions – unless, that is, the price of the commodity in question increases across the board. If all the players in the field start offering a more expensive product, for example, because of supply chain issues felt across the market, then consumers will not change their choices.

Now consider the global markets in energy. Upwards of 80% of all energy consumed in the global economy is fossil fuel-based. Putting a price on carbon will raise the prices of energy pretty much universally. There will not be enough cleaner, greener product to purchase, so most purchasing decisions will remain the same. Price differentiation in the energy market will not be established by asserting a price on carbon.

A key part of Shell’s argument is that price differentiation will occur because of a price on carbon, and that this will drive behaviour change, and yet there is nothing to suggest it could do that effectively.

3. A price on carbon will not enable Carbon Capture and Storage

Athough a key part of Shell’s argument about a price on carbon is the rationale that it would stimulate the growth in Carbon Capture and Storage (CCS), it seems unlikely that the world will ever agree to a price on carbon that would be sufficient to stimulate significant levels of CCS. A price on carbon will be deemed to be high enough when it creates a difference in the marginal extra production cost of a unit of one energy resource compared to another. A carbon price can only be argued for on the basis of this optimisation process – after all – a carbon price will be expected to be cost-efficient, and not punitive to markets. In other words, carbon prices will be tolerated if they tickle the final cost of energy, but not if they mangle with it. However, CCS could imply the use of 20% to 45% extra energy consumption at a facility or plant. In other words, CCS would create a parasitic load on energy resources that is not slim enough to be supported by a cost-optimal carbon price.

Some argue that the technology for CCS is improving, and that the parasitic load of CCS at installations could be reduced to around 10% to 15% extra energy consumption. However, it is hard to imagine a price on carbon that would pay even for this. And additionally, CCS will continue to require higher levels of energy consumption which is highly inefficient in the use of resources.

Shell’s argument that CCS is vital, and that a price on carbon can support CCS, is invalidated by this simple analysis.

4. Shell needs to be fully engaged in energy transition

Calling for a price on carbon diverts attention from the fact that Shell itself needs to transition out of fossil fuels in order for the world to decarbonise its energy.

Shell rightly says that they should stick to their “core capabilities” – in other words geology and chemistry, instead of wind power and solar power. However, they need to demonstrate that they are willing to act within their central business activities.

Prior to the explosion in the exploitation of deep geological hydrocarbon resources for liquid and gas fuels, there was an energy economy that used coal and chemistry to manufacture gas and liquid fuels. Manufactured gas could still replace Natural Gas, if there are climate, economic or technological limits to how much Natural Gas can be resourced or safely deployed. Of course, to meet climate policy goals, coal chemistry would need to be replaced by biomass chemistry, and significant development of Renewable Hydrogen technologies.

Within its own production facilities, Shell has the answers to meet this challenge. Instead of telling the rest of the world to change its economy and its behaviour, Shell should take up the baton of transition, and perfect its production of low carbon manufactured gas.

However, the journalists, outoing editor Alan Rusbridger, Damian Carrington and Terry McAllister probably didn’t fully appreciate that this was part of an orchestrated piece of public relations. The same day as the podcast was published, Shell, along with five other oil and gas companies wrote a letter to officials of the United Nations Framework Convention on Climate Change (UNFCCC).

In the letter to Christiana Figueres and Laurent Fabius of the UNFCCC, Shell and fellow companies BP, BG Group, Eni, Total and Statoil, wrote that they appreciate the risks of the “critical challenge” of climate change and that they “stand ready to play their part”. After listing their contributions towards a lower carbon energy economy, they wrote :-

“For us to do more, we need governments across the world to provide us with clear, stable, long-term, ambitious policy frameworks. This would reduce uncertainty and help stimulate investments in the right low carbon technologies and the right resources at the right pace.”

“We believe that a price on carbon should be a key element of these frameworks. If governments act to price carbon, this discourages high carbon options and encourages the most efficient ways of reducing emissions widely, including reduced demand for the most carbon intensive fossil fuels, greater energy efficiency, the use of natural gas in place of coal, increased investment in carbon capture and storage, renewable energy, smart buildings and grids, off-grid access to energy, cleaner cars and new mobility business models and behaviors.”

The obvious problem with this call is that the oil and gas companies are pushing responsibility for change out to other actors in the economy, namely, the governments; yet the governments have been stymied at every turn by the lobbying of the oil and gas companies – a non-virtuous cycle of pressure. Where is the commitment by the oil and gas companies to act regardless of regulatory framework ?

I think that many of the technological and efficiency gains mentioned above can be achieved without pricing carbon, and I also think that efforts to assert a price on carbon dioxide emissions will fail to achieve significant change. Here are my top five reasons :-

1. Large portions of the economy will probably be ringfenced from participating in a carbon market or have exemptions from paying a carbon tax. There will always be special pleading, and it is likely that large industrial concerns, and centralised transportation such as aviation, will be able to beat back at a liability for paying for carbon dioxide emissions. Large industrial manufacture will be able to claim that their business is essential in sustaining the economy, so they should not be subject to a price on carbon. International industry and aviation, because of its international nature, will be able to claim that a carbon tax or a market in carbon could infringe their cross-border rights to trade without punitive regulatory charges.

2. Those who dig up carbon will not pay the carbon price. Fossil fuel producers will pass any carbon costs placed on them to the end consumers of fossil fuels. A price on carbon will inevitably make the cost of energy more expensive for every consumer, since somewhere in the region of 80% of global energy is fossil fuel-derived. Customers do not have a non-carbon option to turn to, so will be forced to pay the carbon charges.

3. A price on carbon dioxide emissions will not stop energy producers digging up carbon. An artificial re-levelising of the costs of high carbon energy will certainly deter some projects from going ahead, as they will become unprofitable – such as heavy oil, tar sands and remote oil, such as in the Arctic. However, even with jiggled energy prices from a price on carbon, fossil fuel producers will continue to dig up carbon and sell it to be burned into the sky.

4. A price on carbon dioxide emissions is being touted as a way to incentivise carbon capture and storage (CCS) by the authors of the letter – and we’ve known since they first started talking about CCS in the 1990s that they believe CCS can wring great change. Yet CCS will only be viable at centralised facilities, such as mines and power plants. It will not be possible to apply CCS in transport, or in millions of homes with gas-fired boilers.

5. A price on carbon dioxide emissions will not cause the real change that is needed – the world should as far as possible stop digging up carbon and burning it into the sky. What fossil carbon that still enters energy systems should be recycled where possible, using Renewable Gas technologies, and any other carbon that enters the energy systems should be sourced from renewable resources such as biomass.

And so it has begun – Shell’s public relations offensive ahead of the 2015 Paris climate talks. The substance of their “advocacy” – and for a heavyweight corporation, it’s less lobbying than badgering – is that the rest of the world should adapt. Policymakers should set a price on carbon, according to Shell. A price on carbon might make some dirty, polluting energy projects unprofitable, and there’s some value in that. A price on carbon might also stimulate a certain amount of Carbon Capture and Storage, or CCS, the capturing and permanent underground sequestration of carbon dioxide at large mines, industrial plant and power stations. But how much CCS could be incentivised by pricing carbon is still unclear. Egging on the rest of the world to price carbon would give Shell the room to carry on digging up carbon and burning it and then capturing it and burying it – because energy prices would inevitably rise to cover this cost. Shell continues with the line that they started in the 1990s – that they should continue to dig up carbon and burn it, or sell it to other people to burn, and that the rest of the world should continue to pay for the carbon to be captured and buried – but Shell has not answered a basic problem. As any physicist could tell you, CCS is incredibly energy-inefficient, which makes it cost-inefficient. A price on carbon wouldn’t solve that. It would be far more energy-efficient, and therefore cost-efficient, to either not dig up the carbon in the first place, or, failing that, recycle carbon dioxide into new energy. Shell have the chemical prowess to recycle carbon dioxide into Renewable Gas, but they are still not planning to do it. They are continuing to offer us the worst of all possible worlds. They are absolutely right to stick to their “core capabilities” – other corporations can ramp up renewable electricity such as wind and solar farms – but Shell does chemistry, so it is appropriate for them to manufacture Renewable Gas. They are already using most of the basic process steps in their production of synthetic crude in Canada, and their processing of coal and biomass in The Netherlands. They need to join the dots and aim for Renewable Gas. This will be far less expensive, and much more efficient, than Carbon Capture and Storage. The world does not need to shoulder the expense and effort of setting a price on carbon. Shell and its fellow fossil fuel companies need to transition out to Renewable Gas.

An underlying issue not much aired is that increased gas infrastructure is necessary not just to improve competition in the energy markets – it is also to compensate for Peak Natural Gas in the North Sea – something many commentators regularly strive to deny. The new Conservative Government policy on energy is not fit to meet this challenge. The new Secretary of State has gone public about the UK Government’s continued commitment to the exploitation of shale gas – a resource that even her own experts can tell her is unlikely to produce more than a footnote to annual gas supplies for several decades. In addition, should David Cameron be forced to usher in a Referendum on Europe, and the voters petulantly pull out of the Europe project, Britain’s control over Natural Gas imports is likely to suffer, either because of the failure of the “Energy Union” in markets and infrastructure, or because of cost perturbations.

Amber Rudd MP is sitting on a mountain of trouble, undergirded by energy policy vapourware : the promotion of shale gas is not going to solve Britain’s gas import surge; the devotion to new nuclear power is not going to bring new atomic electrons to the grid for decades, and the UK Continental Shelf is going to be expensive for the Treasury to incentivise to mine. What Amber needs is a proper energy policy, based on focused support for low carbon technologies, such as wind power, solar power and Renewable Gas to back up renewable electricity when the sun is not shining and wind is not blowing.

So, this is the second slide from my presentation at Birkbeck, University of London, last week.

When making an argument, it is best to start from consensus and well-accredited data, so I started with government analysis of the energy sector of the economy in the United Kingdom. Production of Natural Gas in the UK is declining, and imports are rising.

I did not go into much detail about this chart, but there is a wealth of analysis out there that I would recommend people check out.

Despite continued investment in oil and gas, North Sea production is declining, and it is generally accepted that this basin or province as a whole is depleting – that is – “running out”.

The summary concluded with the estimate of remaining recoverable hydrocarbons from the UK Continental Shelf (offshore) resources would be between 11.1 and 21 billion barrels of oil equivalent (bboe).

Other data in the report showed estimates of cumuluative and annual oil production :-

billion barrels of oil equivalent

Cumulative production

Annual production

To date to end 2012

41.3

0.6 (in 2012)

To date to end 2012

41.8

0.5 (in 2013)

Additional production 2013 to 2030

7.0

0.44 (average 2014 to 2030)

Additional production 2013 to 2040

9.1

0.21 (average 2031 to 2040)

Additional production 2013 to 2050

10.4

0.13 (average 2041 to 2050)

Another source of estimates on remaining oil and gas resources, reserves and yet-to-find potential is from the Wood Review of 2014 :-

billion barrels of oil equivalent

Low case

Mid-case

High case

DECC reference

12

22

35

Wood Review

12

24

So it’s clear that British oil and gas production is in decline, and that also, reserves and resources to exploit are depleting. The Wood Review made several recommendations to pump up production, and maximise the total recoverable quantities. Some interpreted this as an indication that good times were ahead. However, increased production in the near future is only going to deplete these resources faster.

“The North sea is a very mature oil and gas province and it will inevitably go through a decline. It peaked in 1999 at around 2.9 millions barrels per day and our projections are that it will be half a million barrels in 2035”.

There are many ways to make a living, but there appear to be zero careers in plainspeaking.

I mean, who could I justify working with, or for ? And would any of them be prepared to accept me speaking my mind ?

Much of what I’ve been saying over the last ten years has been along the lines of “that will never work”, but people generally don’t get consulted or hired for picking holes in an organisation’s pet projects or business models.

Could I imagine myself taking on a role in the British Government ? Short answer : no.

The slightly longer answer : The British Government Department of Energy and Climate Change (DECC) ? No, they’re still hooked on the failed technology of nuclear power, the stupendously expensive and out-of-reach Carbon Capture and Storage (CCS), and the mythical beast of shale gas. OK, so they have a regular “coffee club” about Green Hydrogen (whatever that turns out to be according to their collective ruminations), and they’ve commissioned reports on synthetic methane, but I just couldn’t imagine they’re ever going to work up a serious plan on Renewable Gas. The British Government Department for Transport ? No, they still haven’t adopted a clear vision of the transition of the transport sector to low carbon energy. They’re still chipping away at things instead of coming up with a strategy.

Could I imagine myself taking on a role with a British oil and gas multinational ? Short and very terse and emphatic answer : no.

The extended answer : The oil and gas companies have had generous support and understanding from the world’s governments, and are respected and acclaimed. Yet they are in denial about “unburnable carbon” assets, and have dismissed the need for Energy Change that is the outcome of Peak Oil (whether on the supply or the demand side). Sneakily, they have also played both sides on Climate Change. Several major oil and gas companies have funded or in other ways supported Climate Change science denial. Additionally, the policy recommendations coming from the oil and gas companies are what I call a “delayer’s game”. For example, BP continues to recommend the adoption of a strong price on carbon, yet they know this would be politically unpalatable and take decades (if ever) to bring into effect. Shell continues to argue for extensive public subsidy support for Carbon Capture and Storage (CCS), knowing this would involve such huge sums of money, so it’s never going to happen, at least not for several decades. How on Earth could I work on any project with these corporations unless they adopt, from the centre, a genuine plan for transition out of fossil fuels ? I’m willing to accept that transition necessitates the continued use of Natural Gas and some petroleum for some decades, but BP and Royal Dutch Shell do need to have an actual plan for a transition to Renewable Gas and renewable power, otherwise I would be compromising everything I know by working with them.

Could I imagine myself taking on a role with a large engineering firm, such as Siemens, GE, or Alstom, taking part in a project on manufactured low carbon gas ? I suppose so. I mean, I’ve done an IT project with Siemens before. However, they would need to demonstrate that they are driving for a Renewable Gas transition before I could join a gas project with them. They might not want to be so bold and up-front about it, because they could risk the wrath of the oil and gas companies, whose business model would be destroyed by engineered gas and fuel solutions.

Could I imagine myself building fuel cells, or designing methanation catalysts, or improving hydrogen production, biocoke/biocoal manufacture or carbon dioxide capture from the oceans… with a university project ? Yes, but the research would need to be funded by companies (because all applied academic research is funded by companies) with a clear picture on Energy Change and their own published strategy on transition out of fossil fuels.

Could I imagine myself working on rolling out gas cars, buses and trucks ? Yes. The transition of the transport sector is the most difficult problem in Energy Change. However, apart from projects that are jumping straight to new vehicles running entirely on Hydrogen or Natural Gas, the good options for transition involve converting existing diesel engine vehicles to running mostly on Natural Gas, such as “dual fuel”, still needing roughly 20% of liquid diesel fuel for ignition purposes. So I would need to be involved with a project that aims to supply biodiesel, and have a plan to transition from Natural Gas to Renewable Gas.

Could I imagine myself working with a team that has extensive computing capabilities to model carbon dioxide recycling in power generation plant ? Yes.

Could I imagine myself modelling the use of hydrogen in petroleum refinery, and making technological recommendations for the oil and gas industry to manufacture Renewable Hydrogen ? Possibly. But I would need to be clear that I’m doing it to enable Energy Change, and not to prop up the fossil fuel paradigm – a game that is actually already bust and needs helping towards transition.

Could I imagine myself continuing to research the growth in Renewable Gas – both Renewable Hydrogen and Renewable Methane – in various countries and sectors ? Possibly. It’s my kind of fun, talking to engineers.

But whatever future work I consider myself doing, repeatedly I come up against this problem – whoever asked me to work with them would need to be aware that I do not tolerate non-solutions. I will continue to say what doesn’t work, and what cannot work.

If people want to pay me to tell them that what they’re doing isn’t working, and won’t work, then fine, I’ll take the role.

I’d much rather stay positive, though, and forge a role where I can promote the things that do work, can work and will work.

The project that I’m suitable for doesn’t exist yet, I feel. I’m probably going to continue in one way or another in research, and after that, since I cannot see a role that I could fit easily or ethically, I can see I’m going to have to write my own job description.